Вы находитесь на странице: 1из 7

http://kaka-pakistani.blogspot.com/2011/03/acca-f8-audit-and-assurance-free-video.

html

Scope Useful for recurring audits The Role and Timing of Planning Planning an audit involves establishing the overall audit strategy for the engagement and developing an audit plan. Adequate planning benefits the audit (infact helps the auditor) of financial statements in several ways, including the following: Devoting appropriate attention to important areas of the audit Identifying and resolving potential problems on a timely basis. Properly organizing and managing the audit engagement to perform it effectively and efficiently Assisting in the selection of engagement team members with appropriate levels of capabilities and competence to respond to anticipated risks, and the proper assignment of work to them. Facilitating the direction and supervision of engagement team members & the review of their work. Assisting in coordination of work done by component auditors and experts. The nature and extent of planning activities will vary according to the size and complexity of the entity, the key engagement team members previous experience with the entity, and changes in circumstances that occur during the audit engagement. Planning is not a discrete phase of an audit, but rather a continual and iterative process that often begins shortly after (or in connection with) the completion of the previous audit and continues until the completion of the current audit engagement. Planning, however, includes consideration of the timing of certain activities and audit procedures that need to be completed prior to the performance of further audit procedures. For example, planning includes the need to consider, prior to the auditors identification and assessment of the risks of material misstatement, such matters as: The analytical procedures to be applied as risk assessment procedures. Obtaining a general understanding of the legal and regulatory framework applicable to the entity and how the entity is complying with that framework. The determination of materiality. The involvement of experts. The performance of other risk assessment procedures. Objective

The objective of the auditor is to plan the audit so that it will be performed in an effective manner. Requirements 1. Involvement of Key Engagement Team Members The engagement partner and other key members of the engagement team shall be involved in planning the audit, including planning and participating in the discussion among engagement team members. The involvement of the engagement partner and other key members of the engagement team in planning the audit draws on their experience and insight, thereby enhancing the effectiveness and efficiency of the planning process. Requirements and guidance on the engagement teams discussion of the susceptibility of the entity to material misstatements of the financial statements ( Discussion among the Engagement Team) The engagement partner and other key engagement team members shall discuss the susceptibility of the entitys financial statements to material misstatement, and the application of the applicable financial reporting framework to the entitys facts and circumstances. The engagement partner shall determine which matters are to be communicated to engagement team members not involved in the discussion. The discussion: Provides an opportunity for more experienced engagement team members, including the engagement partner, to share their insights based on their knowledge of the entity. Allows the engagement team members to exchange information about the business risks to which the entity is subject and about how and where the financial statements might be susceptible to material misstatement due to fraud or error. Assists the engagement team members to gain a better understanding of the potential for material misstatement of the financial statements in the specific areas assigned to them, and to understand how the results of the audit procedures that they perform may affect other aspects of the audit including the decisions about the nature, timing and extent of further audit procedures. Provides a basis upon which engagement team members communicate and share new information obtained throughout the audit that may affect the assessment of risks of material misstatement or the audit procedures performed to address these risks. Further requirements and guidance in relation to the discussion among the engagement team about the risks of fraud. This discussion shall place particular emphasis on how and where the entitys financial statements may be susceptible to material misstatement due to fraud, including how fraud might occur. The discussion shall occur setting aside beliefs that the engagement team members may have that management and those charged with governance are honest and have integrity. Discussing the susceptibility of the entitys financial statements to material misstatement due to fraud with the engagement team: Provides an opportunity for more experienced engagement team members to share their insights about how and where the financial statements may be susceptible to material misstatement due to fraud. Enables the auditor to consider an appropriate response to such susceptibility and to determine which members of the engagement team will conduct certain audit procedures. Permits the auditor to determine how the results of audit procedures will be shared among the engagement team and how to deal with any allegations of fraud that may come to the auditors attention.

The discussion may include such matters as: An exchange of ideas among engagement team members about how and where they believe the entitys financial statements may be susceptible to material misstatement due to fraud, how management could perpetrate and conceal fraudulent financial reporting, and how assets of the entity could be misappropriated. A consideration of circumstances that might be indicative of earnings management and the practices that might be followed by management to manage earnings that could lead to fraudulent financial reporting. A consideration of the known external and internal factors affecting the entity that may create an incentive or pressure for management or others to commit fraud, provide the opportunity for fraud to be perpetrated, and indicate a culture or environment that enables management or others to rationalize committing fraud. A consideration of managements involvement in overseeing employees with access to cash or other assets susceptible to misappropriation. A consideration of any unusual or unexplained changes in behavior or lifestyle of management or employees which have come to the attention of the engagement team. An emphasis on the importance of maintaining a proper state of mind throughout the audit regarding the potential for material misstatement due to fraud. A consideration of the types of circumstances that, if encountered, might indicate the possibility of fraud. A consideration of how an element of unpredictability will be incorporated into the nature, timing and extent of the audit procedures to be performed. A consideration of the audit procedures that might be selected to respond to the susceptibility of the entitys financial statement to material misstatement due to fraud and whether certain types of audit procedures are more effective than others. A consideration of any allegations of fraud that have come to the auditors attention. A consideration of the risk of management override of controls. It is not always necessary or practical for the discussion to include all members in a single discussion (as, for example, in a multi-location audit), nor is it necessary for all of the members of the engagement team to be informed of all of the decisions reached in the discussion. The engagement partner may discuss matters with key members of the engagement team including, if considered appropriate, those with specific skills or knowledge, and those responsible for the audits of components, while delegating discussion with others, taking account of the extent of communication considered necessary throughout the engagement team. A communications plan, agreed by the engagement partner, may be useful. 2. Preliminary Engagement Activities The auditor shall undertake the following activities at the beginning of the current audit engagement: (a) Performing procedures required by ISA 220 regarding the continuance of the client relationship and the specific audit engagement; (b) Evaluating compliance with relevant ethical requirements, including independence, in accordance with ISA 220; and (c) Establishing an understanding of the terms of the engagement, as required by ISA 210. Performing the preliminary engagement activities specified in the above paragraph at the beginning of the current audit engagement assists the auditor in identifying and evaluating events or circumstances that may adversely affect the auditors ability to plan and perform the audit engagement.

Performing these preliminary engagement activities enables the auditor to plan an audit engagement for which, for example: The auditor maintains the necessary independence and ability to perform the engagement. There are no issues with management integrity that may affect the auditors willingness to continue the engagement. There is no misunderstanding with the client as to the terms of the engagement. The auditors consideration of client continuance and relevant ethical requirements, including independence, occurs throughout the audit engagement as conditions and changes in circumstances occur. Performing initial procedures on both client continuance and evaluation of relevant ethical requirements (including independence) at the beginning of the current audit engagement means that they are completed prior to the performance of other significant activities for the current audit engagement. For continuing audit engagements, such initial procedures often occur shortly after (or in connection with) the completion of the previous audit.

3. Planning Activities The auditor shall establish an overall audit strategy that sets the scope, timing and direction of the audit, and that guides the development of the audit plan. The Overall Audit Strategy In establishing the overall audit strategy, the auditor shall: (a) Identify the characteristics of the engagement that define its scope; (b) Ascertain the reporting objectives of the engagement to plan the timing of the audit and the nature of the communications required; (c) Consider the factors that, in the auditors professional judgment, are significant in directing the engagement teams efforts; (d) Consider the results of preliminary engagement activities and, where applicable, whether knowledge gained on other engagements performed by the engagement partner for the entity is relevant; and (e) Ascertain the nature, timing and extent of resources necessary to perform the engagement. The process of establishing the overall audit strategy assists the auditor to determine, subject to the completion of the auditors risk assessment procedures, such matters as: The resources to deploy for specific audit areas, such as the use of appropriately experienced team members for high risk areas or the involvement of experts on complex matters;

The amount of resources to allocate to specific audit areas, such as the number of team members assigned to observe the inventory count at material locations, the extent of review of other auditors work in the case of group audits, or the audit budget in hours to allocate to high risk areas; When these resources are to be deployed, such as whether at an interim audit stage or at key cutoff dates; and How such resources are managed, directed and supervised, such as when team briefing and debriefing meetings are expected to be held, how engagement partner and manager reviews are expected to take place (for example, onsite or off-site), and whether to complete engagement quality control reviews. Once the overall audit strategy has been established, an audit plan can be developed to address the various matters identified in the overall audit strategy, taking into account the need to achieve the audit objectives through the efficient use of the auditors resources. The establishment of the overall audit strategy and the detailed audit plan are not necessarily discrete or sequential processes, but are closely inter-related since changes in one may result in consequential changes to the other. The Appendix lists examples of considerations in establishing the overall audit strategy. The Audit Plan The auditor shall develop an audit plan that shall include a description of: (a) The nature, timing and extent of planned risk assessment procedures, as determined under ISA 315. (b) The nature, timing and extent of planned further audit procedures at the assertion level, as determined under ISA 330. (c) Other planned audit procedures that are required to be carried out so that the engagement complies with ISAs.

The audit plan is more detailed than the overall audit strategy in that it includes the nature, timing and extent of audit procedures to be performed by engagement team members. Planning for these audit procedures takes place over the course of the audit as the audit plan for the engagement develops. For example, planning of the auditors risk assessment procedures occurs early in the audit process. However, planning the nature, timing and extent of specific further audit procedures depends on the outcome of those risk assessment procedures. In addition, the auditor may begin the execution of further audit procedures for some classes of transactions, account balances and disclosures before planning all remaining further audit procedures. Changes to Planning Decisions during the Course of the Audit

The auditor shall update and change the overall audit strategy and the audit plan as necessary during the course of the audit. As a result of unexpected events, changes in conditions, or the audit evidence obtained from the results of audit procedures, the auditor may need to modify the overall audit strategy and audit plan and thereby the resulting planned nature, timing and extent of further audit procedures, based on the revised consideration of

assessed risks. This may be the case when information comes to the auditors attention that differs significantly from the information available when the auditor planned the audit procedures. For example, audit evidence obtained through the performance of substantive procedures may contradict the audit evidence obtained through tests of controls.

4. Direction, Supervision and Review The auditor shall plan the nature, timing and extent of direction and supervision of engagement team members and the review of their work. The nature, timing and extent of the direction and supervision of engagement team members and review of their work vary depending on many factors, including: The size and complexity of the entity. The area of the audit. The assessed risks of material misstatement (for example, an increase in the assessed risk of material misstatement for a given area of the audit ordinarily requires a corresponding increase in the extent and timeliness of direction and supervision of engagement team members, and a more detailed review of their work). The capabilities and competence of the individual team members performing the audit work.

5. Documentation 12. The auditor shall include in the audit documentation:6 (a) The overall audit strategy; (b) The audit plan; and (c) Any significant changes made during the audit engagement to the overall audit strategy or the audit plan, and the reasons for such changes. The documentation of the overall audit strategy is a record of the key decisions considered necessary to properly plan the audit and to communicate significant matters to the engagement team. For example, the auditor may summarize the overall audit strategy in the form of a memorandum that contains key decisions regarding the overall scope, timing and conduct of the audit. The documentation of the audit plan is a record of the planned nature, timing and extent of risk assessment procedures and further audit procedures at the assertion level in response to the assessed risks. It also serves as a record of the proper planning of the audit procedures that can be reviewed and approved prior to their performance. The auditor may use standard audit programs or audit completion checklists, tailored as needed to reflect the particular engagement circumstances.

A record of the significant changes to the overall audit strategy and the audit plan, and resulting changes to the planned nature, timing and extent of audit procedures, explains why the significant changes were made, and the overall strategy and audit plan finally adopted for the audit. It also reflects the appropriate response to the significant changes occurring during the audit.

6. Additional Considerations in Initial Audit Engagements 13. The auditor shall undertake the following activities prior to starting an initial audit: (a) Performing procedures required by ISA 220 regarding the acceptance of the client relationship and the specific audit engagement; and (b) Communicating with the predecessor auditor, where there has been a change of auditors, in compliance with relevant ethical requirements. The purpose and objective of planning the audit are the same whether the audit is an initial or recurring engagement. However, for an initial audit, the auditor may need to expand the planning activities because the auditor does not ordinarily have the previous experience with the entity that is considered when planning recurring engagements. For an initial audit engagement, additional matters the auditor may consider in establishing the overall audit strategy and audit plan include the following: Unless prohibited by law or regulation, arrangements to be made with the predecessor auditor, for example, to review the predecessor auditors working papers. Any major issues (including the application of accounting principles or of auditing and reporting standards) discussed with management in connection with the initial selection as auditor, the communication of these matters to those charged with governance and how these matters affect the overall audit strategy and audit plan. The audit procedures necessary to obtain sufficient appropriate audit evidence regarding opening balances.